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CIRCULAR No

CIRCULAR No. 69/2002/TT-BTC OF AUGUST 16, 2002 GUIDING THE IMPLEMENTATION OF THE PRIME MINISTER�S DECISION No. 41/2002/QD-TTg OF MARCH 18, 2002 AGAINST THE UNDER-COLLECTION OF VALUE ADDED TAX AND ENTERPRISE INCOME TAX THROUGH SALE PRICES IN CAR AND MOTORBIKE BUSINESS ACTIVITIES

Pursuant to the Government�s Decree No. 28/1998/ND-CP of May 11, 1998 detailing the implementation of the Law on Value Added Tax;

Pursuant to the Government�s Decree No.30/1998/ND-CP of May 13, 1998 and Decree No.26/2001/ND-CP of June 4, 2001 detailing the implementation of the Law on Enterprise Income Tax;

Pursuant to the Government�s Decree No.176/1999/ND-CP of December 21, 1999 on registration fee;

Pursuant to the Prime Minister�s Decision No.41/2002/QD-TTg of March 18, 2002 against the under-collection of value added tax (VAT) and enterprise income tax (EIT) through sale prices in car and motorbike business activities.

The Finance Ministry hereby guides the implementation of above-mentioned Decision No.41/2002/QD-TTg of the Prime Minister as follows:

I. GENERAL PROVISIONS

1. Subjects of application:

Car- and/or motorbike- trading establishments that inscribe invoices handed over to consumers with sale prices lower than the actual sale prices on the market shall have to pay the VAT and EIT arrears according to the sale prices, which shall be determined on the basis of the cars� and motorbikes� minimum price brackets for registration fee calculation, prescribed by the People�s Committees of the provinces and centrally-run cities, and at the same time be sanctioned according to law provisions. Specifically:

- Business establishments that sell cars and/or motorbikes and hand invoices directly to consumers (including organizations and individuals buying cars and/or motorbikes) and inscribe thereon sale prices lower than the minimum prices for registration fee calculation.

- For car- and/or motorbike- trading establishments that deliver goods and hand invoices to their agents for sale strictly according to prescribed prices to enjoy commission but inscribe payment prices lower than registration fee-calculation prices in localities where the goods-delivering establishments are headquartered, they must pay VAT and EIT arrears, which shall be determined according to registration fee calculation prices applicable in such localities.

For cases of selling cars and/or motorbikes with the invoice prices higher than the registration fee calculation prices, the VAT and EIT shall be calculated according to the tax calculation prices inscribed thereon.

2. Cases temporarily not subject to application:

a/ For domestic establishments manufacturing and/or assembling cars and/or motorbikes that sell their products at uniform prices nationwide or in each region or locality, the VAT and EIT shall be calculated according to prices announced by such manufacturing and/or assembling establishments at each specific time-point.

The uniform sale prices set by the establishments must be publicized and notified to the tax agencies directly managing them. In cases where business establishments inscribe invoices with sale prices lower than the prices already publicized and notified to the tax agencies directly managing them, such business establishments must pay the VAT and EIT arrears according to the notified prices.

b/ Sale agents that strictly comply with sale prices set by the goods-delivering establishments and only enjoy commissions according to the provisions at Point 2, Section II, Part C of the Finance Ministry�s Circular No.122/2000/TT-BTC of December 29, 2000 guiding the implementation of the Government�s Decree No.79/2000/ND-CP of December 29, 2000, which details the implementation of the VAT Law.

c/ For business establishments that post up sale prices and strictly comply therewith, if the posted up prices are equivalent to or 5% at most lower than the registration fee calculation prices, taxes shall be calculated according to the posted- up prices. In cases where sale prices are posted up but the above-mentioned provisions are not complied with, the VAT and EIT shall be retrospectively collected according to the registration fee calculation prices.

Business establishments entitled to calculate taxes according to the posted- up sale prices must notify such prices to the tax agencies directly managing them.

- Cars and motorbikes of organizations and individuals that have been granted registration certificates by competent State management agencies (including used cars and motorbikes of diplomatic missions, international organizations or foreigners that are eligible for import tax exemption and not liable to VAT at the import stage, or exempt from registration fee, which are now put on sale), provided that such cars and/or motorbikes are repurchased by, or consigned to, the business establishments for sale.

II. ON VAT AND EIT CALCULATION PRICES

According to the provisions in Article 2 of the Prime Minister�s Decision No.41/2002/QD-TTg of March 18, 2002, the sale prices serving as basis for retrospective collection of VAT and EIT on cars and motorbikes shall be determined according to the cars� and motorbikes� minimum price brackets for registration fee calculation, promulgated by the People�s Committees of the provinces and centrally-run cities. To make it compatible with the provisions on VAT and EIT calculation prices under the VAT and EIT Laws, the Finance Ministry guides the determination of VAT calculation prices and EIT calculation turnover by car- and/or motorbike-trading establishments for consumers as follows:

1. On VAT calculation prices:

The VAT calculation price mean the price not yet included with tax, which shall be determined according to the following formula:

The VAT The registration fee calculation price

calculation = -------------------------------------------------

price 1 + (%) the VAT rate

For used cars allowed to be imported but not yet registered for use, the tax calculation prices shall be determined on the basis of the registration fee calculation prices applicable to imported brand-new cars of the same kind and the residual value (%) of the used cars, which has been determined by the customs agencies to serve as basis for import tax and VAT calculation at the import stage.

2. On EIT calculation turnover:

The EIT calculation turnover shall be determined according to the provisions at Point 1, Section II, Part B of the Finance Ministry�s Circular No.18/2002/TT-BTC of February 20, 2002 guiding the implementation of the Government�s Decree No.26/2001/ND-CP of June 4, 2001 and Decree No.30/1998/ND-CP of May 13, 1998 detailing the implementation of the EIT Law, under which the EIT calculation turnover shall be calculated according to the VAT calculation prices prescribed at Point 1 above.

III. TAX PAYMENT DECLARATION AND TAX CALCULATION METHODS

1. On VAT:

a/ Tax payment declaration: Business establishments selling cars and/or motorbikes, regardless of whether they are subject to the application or temporary non-application of this Circular, shall have to make and send to tax agencies, apart from monthly declarations on VAT calculation enclosed with the inventories of goods sold and purchased according to the forms prescribed at Point 1, Section II, Part C of the Finance Ministry�s Circular No.122/2000/TT-BTC of December 29, 2000 guiding the implementation of the Government�s Decree No.79/2000/ND-CP of December 29, 2000 detailing the implementation of the VAT Law, the detailed lists of already sold cars and/or motorbikes, according to form No.01/XOT-XM* issued together with this Circular.

b/ Tax calculation methods:

b1/ For cases temporarily not subject to the provisions at Point 2, Section I above, the tax declaration, calculation and payment shall comply with current provisions of other legal documents.

b2/ Car- and/or motorbike-trading establishments breaching regulations on sale prices shall be subject to retrospective tax collection as follows:

Basing themselves on the quantities of cars and/or motorbikes sold directly to consumers and delivered to agents for sale in a given period, the establishments must make self- declarations for tax payment, which shall be demonstrated in the lists of goods sale and/or service provision vouchers and invoices and the list of sold cars and/or motorbikes. The declared figures must be compatible with those in the accounting books and sale invoices. On the basis of the figures declared by the business establishments, the tax agencies shall make comparison and determine the quantities of cars and/or motorbikes subject to the retrospective tax collection, then fix the VAT calculation prices to serve as basis for calculation of the to be-retrospectively collected tax amounts.

The to be-retrospectively collected tax amounts shall be determined as follows:

The to be- The VAT amount calculated The VAT amount

retrospectively = according to prices prescribed - calculated according

collected VAT amount at Point 1, Section II above to sale invoices

Particularly for car- and/or motorbike-trading establishments paying VAT by the direct mode, they shall monthly base on the turnover reflected on sale invoices to declare their turnover with the tax agencies. Basing themselves on the business turnover declarations, the tax agencies shall compare the turnover reflected on sale invoices with the registration fee calculation prices (already included with VAT) to determine the difference between the fixed turnover and the declared turnover. The entire difference between the fixed turnover and declared turnover shall be determined the to be added value. The to be-retrospectively collected tax amount shall be determined according to the following formula:

The to be- The turnover calculated The The

retrospectively = according to the registration - declared x VAT

collected VAT amount fee calculation price turnover rate

c/ Retrospective collection decisions:

In order to distinguish between the tax amounts payable according to declarations of business establishments and the tax amounts calculated according to invoice prices lower than the prescribed prices, the tax agencies shall issue retrospective tax collection decisions according to form No. 02/XOT-XM* (for business establishments managed by the provincial/municipal Tax Departments) or form No. 03/XOT-XM* (for business establishments managed by the tax sub-departments) and hand them over to the taxpayers.

The retrospective tax collection decisions shall be issued monthly and handed to the taxpayers at the time of issuance of the VAT payment notices. The tax arrears payment time-limits shall comply with the retrospective tax collection decisions, which shall coincide with the tax payment time-limits in the VAT tax notices.

2. On EIT:

Basing themselves on the EIT calculation turnover mentioned at Point 2, Section II of this Circular, the tax agencies shall request the business establishments to re-determine the EIT amounts temporarily paid in each quarter. Particularly for business establishments calculating tax directly on the added value, the EIT calculation turnover shall be determined according to the registration fee calculation prices (already included with VAT).

In cases where business establishments fail to declare adjustments by themselves, the tax agencies shall, basing themselves on the EIT calculation turnover and the estimated expenses for fixing taxable incomes as well as the quarterly payable tax amounts, notify the business establishments of the tax amounts to be paid temporarily into the State budget.

IV. HANDLING OF VIOLATIONS AND COMPLAINTS

1. Business establishments selling cars and/or motorbikes that violate the declaration regime shall be sanctioned according to the provisions of the VAT Law, the EIT Law and the Government�s Decree No.22/CP of April 17, 1996 on sanctioning administrative violations in the field of tax.

In cases where car- and/or motorbike- trading establishments make wrong declaration of the quantity and kinds of the sold cars and/or motorbikes, which leads to the reduction of the payable tax amounts and is determined as act of making false declarations for tax evasion under the provisions in Section II of the Finance Ministry�s Circular No.30/2001/TT-BTC of May 16, 2001 amending and supplementing its Circular No.128/1998/TT-BTC of September 22, 1998, which guides the implementation of the Government�s Decree No.22/CP of April 17, 1996 on sanctioning administrative violations in the field of tax, such establishments shall, apart from paying the evaded tax amounts, be subject to fines of from two to five times such evaded tax amounts.

2. Business establishments selling cars and/or motorbikes and inscribing invoices handed to consumers with sale prices lower than the actual sale prices on the market shall, apart from being liable to the VAT and EIT arrears calculation and payment as mentioned above, be subject to the following administrative sanctions regarding taxes:

- Sanctions against violations of administrative procedures as prescribed at Point 1c, Article 1 of the Government�s Decree No.22/CP of April 17, 1996 on sanctioning administrative violations regarding taxes.

- Sanctions against acts of evading taxes as prescribed at Point 1b, Article 3 of above-mentioned Decree No.22/CP, provided that there are sufficient evidences on tax evasion.

3. Where the violators fail to pay taxes and/or administrative violation fines under the retrospective tax collection decisions and decisions on sanctioning administrative violations regarding taxes, they shall be subject to the application of coercive measures for tax payment. If they still deliberately refuse to make payment, the tax agencies can stop supplying sale invoices to them.

4. The business establishments handled for violations shall have the right to complain about retrospective tax collection decisions or decisions on sanctioning administrative violations regarding taxes, issued by the tax agencies. The order of and competence for complaint settlement shall comply with the provisions of the VAT and EIT Laws.

V. ORGANIZATION OF IMPLEMENTATION

The provincial/municipal Tax Departments shall, basing themselves on the guidance in this Circular, disseminate it to the business establishments so that the latter make declarations and pay taxes in strict compliance with stipulations.

In order to ensure the proper and full collection of taxes, avoiding the under- or over-collection of taxes, the tax agencies shall have to conduct regular investigation and survey, so as to fully grasp the situation of car and motorbike price fluctuations on the market. In cases where the market prices rise or fall more than 5%, the Tax Departments of the provinces and centrally-run cities shall coordinate with the provincial/municipal Finance and Pricing Services in submitting to the People�s Committees of the provinces and centrally-run cities the adjustments to the registration fee calculation price brackets for cars and motorbikes, making them compatible with the practical market situation and serving as basis for retrospective collection of VAT and EIT.

This Circular takes effect 15 days after its signing.

Should problems arise in the course of implementation, organizations and individuals are requested to promptly report them to the Finance Ministry for additional guidance.

For the Finance Minister

Vice Minister
TRUONG CHI TRUNG